Tag Archives: America Invents Act

Can small businesses afford weaker U.S. patents?

Can businesses and entrepreneurs compete with weaker U.S. patents in an innovation-driven global economy?

An event featuring a broad range of IP thought-leaders on October 26 in Silicon Valley will attempt to find out.

“Entrepreneurship, Innovation and Patenting in the U.S. – Implications for the future of U.S. Competitiveness” is the topic of a presentation and networking session being held at H-P World Headquarters in Palo Alto on Wednesday October 26 at from 6:00 to 8:imgres30.

The event is open to the public and limited seating is available on a first come basis. There is a $40 charge to cover food and refreshments.

Speakers include Professor Carl J. Schramm, The Hon. Judge Randall Rader (Ret.) David J. Kappos, former USPTO Commissioner and former head of intellectual property at IBM, and Professor Adam Mossoff of George Mason University School of Law where he co-founded the Center for the Protection of Intellectual Property. Robert Aronoff is the organizer. The International IP Commercialization Center is the sponsor.

For the full list of speakers go here. To register go here.

Image source:iipcc.org

The impact of higher patent licensing hurdles may not be fully understood

Most patent holders would agree that licensing patents for revenue has gone from bad to awful — from difficult less than a decade ago, to virtually impossible today.* 

Determining if the courts and lawmakers have facilitated improvements or simply over-corrected for weaknesses in the patent system largely depends on whom you ask, and when.

While obvious to some, the fairness of the U.S. patent system is no longer apparent to all.

In 1996, the days of the first tech bubble, there was some uncertainty regarding patent validity. Patent licensing was not easy back then, but it was viable and still could be conducted on a business basis. Out-licenses could be negotiated without first filing suit, and significant damages awards were occasionally paid, although not as frequently has some would have us believe. The threat of an injunction that would freeze product sales was still a very potent weapon for those considering enforcement.

Things became very difficult in 2006 (high uncertainty), when injunctions became virtually impossible to obtain and NPEs, the businesses that tended to enforce the best patents most frequently, were characterized as a virulent strain of a disease that needed to be eradicated. Lost in defendants’ anger is that those who enforce valid patents may actually facilitate innovation and competition, and play a positive role in job creation.

Weighing In

Weighing in on whether the over-corrected patent pendulum has finally started to swing back towards the middle are Brian Hinman, Chief IP Executive at Philips, and Ashley Keller, Managing Director at Gerchen Keller Capital. In Balancing Act, in the May Intangible Investor simple-pendulum-suspensionin IAM, they speculate on what it will take to move the patent pendulum more toward the middle where it belongs.

In 2016, with the emergence of an extreme degree of uncertainty, patent licensing became virtually impossible. (Degree of uncertainty licensing can be compared to degree of difficulty” in a gymnastics competition, although their are no bonus points for successfully enforcing an infringed patent.) Of no help was the rise of preemptive, defensive litigation (declaratory judgments), forcing many patent holders to sue first and (maybe) talk later.

Factors responsible for patents’ loss of reliability include the American Invents Act (AIA) which permitted Inter Partes Reviews (IPRs), litigation-like, post-issuance examinations of patents that invalidated many invention rights filed under previous guidelines and slow enforcement. A number of  district court, Court of Appeals for the Federal Circuit (CAFC) and United States Supreme Court cases have gone against patent holders wishing to license for revenue, including the Alice decision, which rendered many software patents and business methods invalid.

Another major set-back is Non-Practicing Entities or NPEs, also known as patent “trolls” or owners who do not commercialize or sell products but hope to generate ROI through royalty payments. All NPEs have been lumped together and have been universally demonized as “black hats” who are the primary source of all that ails the U.S. patent system and that wish to enforce questionable rights and shake down otherwise innocent companies wishing to avoid costly disputes.

However, many of the largest corporations engage similar practices themselves (aka privateers), while decrying other NPE’s.  As a result of the actions of anti-patent proponents — many large patent holders themselves — patents have become even more uncertain, and litigation longer and more costly. NPEs continue to be held responsible for the need for more anti-patent legislation, and have become a sort of obsession for some businesses and lawmakers wishing to re-frame the discussion and absolve many tech companies of serial theft.

According to Patent Progress, “a project of the Computer & Communications Industry Association (CCIA)” that endeavors to limit patents reach, there are six bills currently before Congress that still endeavor to reel-in or otherwise weaken patents and deter enforcement.

Only one piece of patent legislation, the STRONG Act, which is before the Senate, attempts to roll back some of so-called improvements introduced over the past several years, much of which in retrospect looks like an overreaction to a much smaller problem.

Fourteen bills were introduced in the 113th Congress (2013–14) alone to deal with one or more aspects of the patent troll issue. For a list of these and other bills, go here. Computer and Communications Industry Association members include Amazon, Facebook, Google, Microsoft, Red Hat and Samsung.

More and Higher Hurdles

The diagram below, “Patent Licensing: Higher Hurdles for Protecting New Ideas,” is a graphic reminder of the progressive number and nature of impediments added since 1996 that discourage the licensing of U.S. patents. It was prepared by Brody Berman Associates for a client who has given permission for it to be shared. Key court decisions diminishing patent value and creating more uncertainty can be seen in a second slide below.

case2Patent TimeLine

“Risk-Adjusted Theft”

For technology companies the era of the licensing discussion is all but over. Uncertainty has never been greater, nor has hostility to owners offering an invention for license, no matter how good the patents or fair the terms. This leaves no alternative but to litigate.

“Efficient” infringement, a term we are hearing more of lately, is really a kind of risk-adjusted theft. Simply put, the deck is all but stacked against patent licensors (who are now forced to sue) because it is more economically viable today for most businesses to steal what they use than pay for it.

The courts, lawmakers and media will need to start soon if the damage that has been done to patent licensing is to be reversed. The Supreme Court decisions below speak volumes for the imbalance and how far patents have to go to bet back to the middle. It is not so much that Alice made software unpatentable as it rendered most existing business methods and many software patents invalid under the narrower guidelines that the Court established.

If proponents of fewer and lower hurdles feel the system has over-corrected and is doing damage, they had better turn up the volume. The courts, legislators and even most patent holders do not appear to be listening.

casesPatent TimeLine

 

*My gratitude to Irv Rappaport who assisted in writing this article. Irv has served as the head of IP departments at Apple, National Semiconductor and Medtronic, and was a consultant to Intel responsible for suggesting the Intel Inside® campaign. He has served as an expert witness more than 70 cases and is named more than 20 U.S. patents. He also served as a USPTO patent examiner and a U.S. Army officer.

Image source: Brody Berman Associates; tutorvista.com

Responsible Patent Licensing is Focus of NY Financial Conference

Executives of top patent holders will participate in “NPE 2015: The Business of Responsible Licensing” to be held in NYC’s financial district on March 12. There are still some audiences that believe that NPE, or non-practicing entity, is just another term for patent “troll.” To them patent holders who wish to license their inventions but do not sell products are suspect. More suspicious are companies that refuse to recognize that there are vast differences in the quality of asserted patents and the business that own them. NPE 2015: The Business of Responsible licensing will examine those differences and ways to combat misconceptions among patent holders. The conference will attract both non-practicing and practicing patent holders of all sizes, as well as investors, law firms, and law makers. NPE 2015, which will 6a00d83452408569e2010534bb9b53970b-800wibe held in NY’s financial district at the Convene conference center, steps from the stock exchange, is being produced by IP publishing and conference leader IAM, which produces the Global and Asian IP Business Congress. Businesses that engage in responsible patent licensing, that deploy quality rights for a market return, differ significantly from “trolls” who undermine the patent system by relying of the high cost of litigation to force a quick settlement. Recent legislation has done much to eliminate that strategy. Increased Scrutiny “Non-practising entities (NPEs) are facing greater scrutiny than ever before – be it from the media, US Congress, regulatory authorities or the courts – with much of that attention casting them, and large parts of the patent market, in a negative light,” writes conference organizer Richard Lloyd. “But at the same time, many NPEs’ business models are proving successful. A growing band of public IP companies (PIPCOs) have attracted new investors to the sector. The licensing strategies of many NPEs have never been more sophisticated, with several emphasising a shift away from litigation. And the growing confidence in the sector can be seen in several businesses committing themselves to best practices and playing an active role as the licensing sector considers adopting industry-wide standards.” IP thought-leaders who will be present at the conference include John Lindren, CEO of Conversant, which has taken a leadership role promoting best practices for patent licensing, Hon. Randall R. Rader, former Chief Judge of the Court of Appeals for the Federal Circuit, and David Kappos, former USPTO Commissioner. A full list of speakers can be found here. “The days of asserting questionable patents to secure early settlements from defendants are all but over,” said Gerald Holtzman, President of Personalized Media Communications, an inventor-owned company,3J6A3349 who will participate on a panel in New York on March 12. “Still, there are those who would prefer patents be even weaker to further their agenda. America needs strong patents and a viable system to nurture innovation, encourage commerce and provide jobs.” “Being able to distinguish clearly between good patents and legitimate holders is an essential part of the equation.” Persons interested in attending, NPE 2015 can register here. Image source: wf360.typepad.com/; convene.com

Vringo Stock Dive: Bad Day in Court or Flawed Business Model?

Google’s successful CAFC appeal has vacated Vringo’s already reduced $30M award. Could it have quit while it was ahead?

Vringo stock traded as high as $5.45 in 2013 and as low as $.67 a few days ago. It lost 80% of its value in a matter of hours when its big win was overturned by the Court of Appeals. Since then it has regained about 20% of its value. While the company’s dreams of a $1B+ payout appear to have been dashed, its future for some recent shareholders may not.

IP CloseUp readers will recall that back in February, when VRNG’s shares were touching $5, I reminded them that a big win was not certain (here).

Fresh off of a patent victory on Google’s AdWords in 2012 Vringo (NASDAQ: VRNG)  was looking toward a record payout and a share price of $10 or higher. But something happened on the way to the party. On August 15 Vringo received news that it had lost an appeal filed by Google that sent the stock into a tailspin.

Business Model or Model Business?

The sudden, dramatic decline in VRNG shares begs a few questions: (1) Did Vringo over-emphasize the importance of the single victory? (2) Is its business model dependent on a big win and there is little else for investors to? (3) Does it simply not care about spikes in its share price?

Loosing cases is a fact of NPE life. In the post American Invents Act (AIA) environment, NPEs must achieve a pipeline of quality patents, licenses and disputes to endure. A “portfolio” of risk, imgresif you will. While NPEs may lose more today than in the past — and win less big —  the economics of patent enforcement are still viable for those with quality, capital and patience. Public ownership adds pressure to patent licensing companies, and may appeal more to short sellers than value investors. Shorts lose less than investors do.

Vringo won $30M  from a jury verdict in 2012, less than the $493M verdict it had sought. The judge overseeing the case ordered Google to pay a running royalty amounting to 1.36 percent of US AdWords sales. Those additional payments could have been more than $200 million annually. Instead, Google appealed.

Was Vringo right to push the litigation envelope or should it (could it?) have taken the money and run?

“Vringo once had a small ‘video ringtone’ business,” writes Joe Mullin in Ars Technica, “but today its value is in its patents. It purchased foundational patents from Lycos, an early search engine, and put them in a holding company it calls I/P Engine.”

Mullin continues: “The result will resonate beyond Vringo’s case. By dismantling two patents from a once-famed search engine on this basis, the majority has sent a message that more Federal Circuit judges are willing to invalidate patents following the results of this year’s most important Supreme Court patent case, Alice v. CLS Bank. That opinion, which was cited in a concurring opinion, said that obvious ideas—especially ones that don’t amount to more than an idea surrounded with computer jargon—shouldn’t get patents.”

The Supreme Court has embarked upon a slippery slope, providing even less clarity about what computer coded inventions are indeed novel and non-obvious.

Request for En Banc Review

Vringo plans to file a petition for an en banc review of the adverse federal appeals court ruling it received last week for its infringement suit against Google, AOL, IAC Search and Media, Gannett Company and Target. Those are not often heard. If the appeal is granted expect the stock to jump. If the appeal is heard, Google may think it prudent to settle, maybe not, given Alice v. CLS Bank.

Vringo (NASDAQ:VRNG) Director Noel Joseph Spiegel acquired 30,000 shares of Vringo stock on the open market in a transaction dated Friday, August 15th. The shares were purchased at an average cost of $0.89 per share, for a total transaction of $26,700.00. Following the completion of the transaction, the director now directly owns 50,000 markcuban_E_20120413183830shares of the company’s stock, valued at approximately $44,500. The purchase was disclosed in a legal filing with the Securities & Exchange Commission, which is available at this link.

Shares of Vringo opened at 1.40 on Wednesday. Vringo has a 1-year low of $0.67 and a 1-year high of $5.45.  According to WKRB News and Analysis, “Vringo also was the target of unusually large options trading activity on Monday. Traders bought 7,610 call options on the stock. This represents an increase of approximately 419% compared to the typical volume of 1,465 call options.”

“Vringo also sued Microsoft over its Bing search engine in January 2013,” reports Ars Technica. “Microsoft quickly settled the suit, giving Vringo six additional patents, and agreed to pay Vringo $1 million plus five percent of whatever was won from Google. That final payment now looks like it will be five percent of nothing.”

In 2012 Dallas Mavericks owner Mark Cuban bought a 7.4% stake in Vringo.

 

Image source: wsj.com

Tensions Rise Between USPTO and Court of Appeals

Patent Office is in Defiance of CAFC Mandate on Inequitable Conduct, says former Chief IP Executive

A former head of IP at a Fortune 100 company has told IP CloseUp that the United States Patent and Trademark Office (USPTO) is undermining the authority of the highest patent court, the Court of Appeals for the Federal Circuit (CAFC), over a new standard requiring that the burden of proof for inequitable conduct be on the patent holder, not the infringer.

“The patent system is a game of haves and have-nots and, unfortunately, the vast majority of Americans do not own patents and see doing so as stifling competition. In fact, the system, if working properly as it has in the past, stimulates competition,” he told IP CloseUp.

“Tensions are rising between the CAFC and Patent Czar Kappos.  After the significant changes to the standards for raising inequitable conduct that resulted from the En Banc CAFC decision in the Therasense case in May 2011, the PTO proposed new changes to 37 CFR 1.56 that specifically included the Therasense standards in July 2011 and received written comments through September but held no hearings.  Upon passage of AIA last September, the PTO now trumpets Supplemental Examination to deal with such issues and has not made any changes to 37 CFR 1.56.

Making Sense of Therasense

“However, Therasense specifically holds that it is the accused infringer’s burden to prove inequitable conduct, not that of the patent owner.  The PTO’s actions in defiance of the CAFC mandate is perfectly consistent with the intended purposes of AIA, which is to take away as much as possible from the Courts, and push dealing with patents back into the PTO where applicants will languish under a Czar-run bureaucratic system.

“I predict that it will become more difficult to get patent infringement cases heard by juries and that good patents will be bottled up in the PTO for years.

“After years of defeat, the supporters of AIA figured out the perfectly ambiguous methodologies for killing patents they don’t want to have to pay to practice.  They bought and paid for the ‘perfect storm’ to weaken the patent system.  And as for job creation, if you believe that one, I have a bridge near you that I could sell you.

The former Chief IP Exec (CIPO) also told IP CloseUp that patent holders should be wary of the latest efforts of those trying to weaken the patent system by sliding a “technical amendment” by Congress that would undo the compromises reached in the passage of AIA. “The proposed change in the estoppel provisions will open the door to serial post grant reviews and make it even more difficult to get a granted patent cleanly out of the grips of the USPTO.

“This could adversely affect a patentee in a post grant review or inter partes re-exam by eliminating the estoppel feature of AIA as it was signed in Sept. 2011,” he added.

*     *     *

Mayo v. Prometheus Further Weakens the Patent System

The same former CIPO, who is also a patent attorney and former USPTO examiner, strongly disagrees with Mayo v. Prometheusa recent Supreme Court decision also with far-reaching implications.

This decision,” he told IP CloseUp, “sets the patent system on a course to find more areas determined to be part of the ‘laws of nature’ and therefore unpatentable. It sets a very bad precedent.  In my opinion determining the correct levels in the blood cells for administering more or less of a drug is not a ‘law of nature.’  It took a lot of research to determine what those levels are and should be entitled to patent protection for the limited duration of a patent.  Does this decision put most medical diagnostic companies out of business? It might.

“This decision could have an enormous impact on not only medical diagnostic tests that have been patentable in the past, but on all forms of inventions that relate to tests for determining characteristics found in nature.  For example, in physics, say I discover a new way of determining how to split certain atoms in a particular way to get a particular result.  Can it be argued that since atoms and their constituent components exist in nature, that such a discovery should not be patentable?

Added Tension

“So we now have the Supreme Court in battle with the CAFC over the last 10 years over the scope of patent law and added to that tension we now have the AIA, which has Commissioner Kappos battling with the CAFC about who really decides patent validity and infringement issues. The PTO will soon be turned into another forum like the ITC. 

“I believe over the next few years, it may become much more difficult to get a patent infringement case to a jury if Post Grant Reviews are pursued by accused infringers.  If the PTO finds a patent valid and infringed, will the Administrative Law Judges have the authority to grant damages in their decisions?

“I am not aware of the AIA granting such authority. The ITC is limited to granting exclusion orders to keep infringing products out of the U.S., but has no authority to grant damage awards.  Currently, only the Federal District Courts have that authority.

“The next step for the anti-patent forces would be to further amend AIA to allow the PTO to grant damages.  There is also talk of NPE’s being excluded from bringing patent cases before the ITC.

“The anti-patent proponents are wreaking havoc,” he concludes, “and are likely to continue to weaken an already beaten-down U.S. Patent System.”

Illustration source: judicialnominations.org; commnexus.org 

UK Inventor Burns: Torches Patent He Can’t Afford to Use

The High Cost of Enforcement Compels Him to Destroy His Rights Before Parliament

Without the funds to enforce a patent it’s not worth the paper it’s written on.

We’ve all heard that before. But never was this more dramatically illustrated as when UK inventor, Michael Wilcox, recently set fire to his patent for an innovative color printing technology in front of Parliament in London.

In a symbolic act of defiance Wilcox torched the rights to what he had created, spending 150,000 GBP of his own money and  100,000 of the government’s. He knew that even if he caught infringers red-handed, he could not afford to face them in court. They get a free ride; he gets a goose egg.

Sad Story

This is a sad story that should have gotten much more play than it did.

I’ve said for years that “a patent holder can’t dial 911 and say ‘Arrest that man. He’s infringing my patent.'” Those who violate copyrights, at least, can face criminal charges. The onus of proving patent infringement is on the holder, and frequently the cost is simply too high.

I thought I would write something about the Wilcox public “execution” but Patrick Anderson at the excellent Gametime IP beat me to it. Patrick did such a fine job or reporting and tying SME abuse to what is happening in the US after the dubious America Invents Act, I am just going to link to his post and let you read it first hand.

I will add that Wilcox’s symbolic act of defiance hopefully dramatizes the patent system’s actual as opposed to imagined failings and abusers. Be sure to read The Telegraph story at the end or Patrick’s post.

While at first glance the patent burning may appear to be little more than a bit of street theater, it conveys a timely story. SMEs and inventors give up on patents on a massive scale, much to the delight of infringers, many of whom are large high-tech companies that can well afford to keep the costs of protracted litigation high.

Said a technology broker to The Telegraph: “Patenting without a realistic threat of prosecution is a toothless tiger.”

Image source: telegraph.co.uk

Patent Reform Effectively Ends Multi-Party Suits, Says Expert

Filing Costs Will Rise; Post-Grant Reviews Will Impede

Dear Bruce,

A new provision I just became aware of in an article by Morrison & Foerster regarding the Joinder and Consolidation provisions of the new American Invents Act absolutely kills a patent owner’s right to sue multiple defendants in a single suit. (AIPLA Lexology Sept. 15, 2011).

In addition, there are ambiguities making it unclear whether a patent owner can sue an infringer and component suppliers of that infringer in a single suit.  Even if you file 20 separate suits in the same court, the court is likely to transfer most of the cases out to defendants’ home jurisdictions based on forum non conveniens.

Sorting it Out

This new patent law is a total disaster on almost all provisions and will take years to sort out.  It is perfect for the big-company infringers who do not want to pay others for infringing upon their patents.  They can throw their patent worries out the window. 

When a client asks a patent attorney how much it will cost to obtain my patent, they have no idea how to answer.  It could run in the hundreds of thousands of dollars just to get past the Post Grant Reviews.  For example, a patent issues and 20 companies each file separate Post Grant Review Petitions, each citing different prior art.  It will be a nightmare for the PTO and cost the patent applicant a fortune in fees.

More Obstacles; Dangerous Consequences

I believe that the number of patents that get through all the obstacles now in place at the PTO and the rising backlog of applications requiring examination will dramatically decrease the number of actual patents sought and enforced by applicants.  Both big and small companies alike may decide it no longer makes economic sense to pursue patents.  That result insures that U.S. companies and other infringers from all over the world will have a free ticket to flood theU.S.with cheap infringing products to further emasculate the U.S .economy.  The supporters of this new law may wish they had never sought it.  The potential unintended consequences have been ignored in the rush to satisfy the special interests currently running the U.S.

This new law throws the USPTO under a train, burdening it with enormous new tasks and no additional funds to run an already overburdened and overworked entity charged with managing the flow of patentable innovation into our economy. According to former Chief Judge of the CAFC, Paul Michel, the PTO has been shown to have the worst IT system of any federal agency.  Worse, this new law assures that jobs in this country will continue to be destroyed and investment in innovation decreased.

Economic Impact

We are back to the days of Standard Oil in the early 1900s, when Teddy Roosevelt took on the trusts and busted some of them.  Who will now step up to do that job again?  In the last 100 years those old trusts have been replicated in the current IT, financial and other oligopolistic industries that are crushing our economy and destroying the U.S. middle class.

A suggested motto for the new patent law: “Bottle Up Patents in the PTO and If They Ever Get Past the PTO, Patent Owners Can Only Sue a Single Infringer in an Infringement Suit.”

Irving S. Rappaport, Esq., CLP
Palo Alto,CA

Image source: urbanchristiannews.com

VIDEO:

Judge Paul Michel, Chief Judge, United States Court of Appeals for the Federal Circuit, 1988-2010 analyzes the Patent Reform Bill at the USBIC (U.S. Business & Industry Council) Senate briefing, September 6, 2011


Pat Choate, economist and author of Hot Property, comments as a member of the USBIC panel before the Senate briefing.


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